The invention relates generally to customer relationship management (CRM) and more particularly to a system and method for developing an integrated business decision framework for improved decision making in business processes.
There are a number of distinct business processes that consumer or retail finance organizations routinely undertake. Of major importance are the risk management and the customer relationship management processes. Traditionally, banks and financial institutions have kept these business processes as separate entities. The decisions that involve both are usually taken at a higher administrative level, often in an ad-hoc fashion. Risk management is traditionally based on identifying customers that have a propensity to remain in good financial standing and not default on obligations, or in other words, that have a minimum risk of default. For example, a “risk” or “credit scoring” process may be used to score customers according to their propensity to remain in good financial standing and not default on obligations. The risk scoring process in general may also be based on several factors, such as the customer's credit risk profile, his/her income, his/her profit potential, the offered product and the credit policies of the finance organization.
On the other hand, customer relationship management (CRM) is based on identifying high-potential current or future customers who may not necessarily have a low risk of default. Of significant importance here is the computation of “response scores” for marketing campaigns, which are dedicated to identifying high-potential current or future customers, “high potential” being defined by a favorable likelihood of response of a consumer to a new offer of credit. A number of statistical analysis approaches have been used to define the characteristics that are most predictive of a consumer's future behavior. Furthermore, and as will be appreciated by those skilled in the art, the need to market aggressively to moderate risk individuals and households is business-critical in the current highly competitive consumer finance world. Marketing activities, such as, for example, customer acquisition, cross-selling, up-selling and customer retention play a significant role in attracting and retaining customers, through aggressive marketing policies. However, many of these activities are often designed separately, rely on specific business rules and are performed independently of each other. In addition, conflicting goals between risk and marketing often arise, resulting in a non-unified risk and marketing strategy.
In addition, the computation of risk scores and response scores by risk management and CRM processes are generally performed independently and also do not take into consideration pricing policies associated with financial products. In general, pricing policies for financial products may be based on several factors, such as, for example, meeting a specific target return on investment, maximizing revenue, or based on the average industry price for a particular financial product. Furthermore, the computation of risk scores and response scores by these processes is usually static in nature, and does not take into consideration key transactional portfolio trends, thereby resulting in the generation of sub-optimal business decisions.
It would be desirable to integrate the key portfolio management processes of risk, marketing and pricing policies into a single platform for improved decision making in business processes. In addition, it would be desirable to develop an integrated business decision framework that can integrate and optimize various marketing activities to meet a common business goal, that can serve to recommend business decisions, and provide an analytical framework for making collective decisions on routine processes such as pricing of a financial product and determining the creditworthiness of the members of a target population.